"A Virtuous Debtor? South Korea's External Debt Management, 1962-1983"

In 1979, in an internal report of Apocalypse Now, the Bank of England examined the consequences of possible defaults by major borrowing countries. Three years later, many of them troubled to service the debt, except South Korea; the developing countries in East Asia, whose economic growth largely depended upon foreign sources, manoeuvred to avoid the crisis. By examining South Korea’s external debt management, this paper attributes the neoliberal policy of technocrats of the military government. In 1970, the military government of Park Chung-hee turned to the Eurocurrency market to finance its ambitious economic growth away from the aid programmes and grants by the US and Japan. Throughout the decade, South Korea emerged to be one of the most indebted non-Western countries. Despite the Cold War tensions with North Korea and the political pressure on the authoritarian rule from the US, which aggravated the country's economic prospect, the policy assumption of low-level debt-service-ratio implemented by the elite bureaucrats functioned as a positive factor in evaluating the creditworthiness of South Korea by international banks. And the policy of price stabilization (i.e. anti-inflation) continued into the 1980s, during the turbulent moments of the assassination of President Park and the newly inaugurated military government. As a result, South Korea stayed on a stable route to economic success. However, at the same time, such a neoliberal policy to appease foreign creditors required the domestic sacrifice of strong controls over wages and price levels. In doing so, this archive-based research offers a successful case study of external debt management of developing countries and examines the relations between domestic politics and global finance of the Eurocurrency market.